IDEAS home Printed from https://ideas.repec.org/a/vrs/foeste/v12y2012i2p58-71n8.html
   My bibliography  Save this article

Selected Robust Methods for Camp Model Estimation

Author

Listed:
  • Trzpiot Grażyna

    (University of Economics in Katowice, Faculty of Informatics and Communication Department of Demography and Economic Statistics Bogucicka 14, 40-226 Katowice, Poland)

Abstract

This paper presents evidence that Ordinary Least Squares estimators of beta coefficients of major firms and portfolios are highly sensitive to observations of extremes in market index returns. This sensitivity is rooted in the inconsistency of the quadratic loss function in financial theory. By introducing considerations of risk aversion into the estimation procedure using alternative estimators measures of variability we can overcome this lack of robustness and improve the reliability of the results.

Suggested Citation

  • Trzpiot Grażyna, 2012. "Selected Robust Methods for Camp Model Estimation," Folia Oeconomica Stetinensia, Sciendo, vol. 12(2), pages 58-71, December.
    • Handle: RePEc:vrs:foeste:v:12:y:2012:i:2:p:58-71:n:8
    DOI: 10.2478/v10031-012-0032-7
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/v10031-012-0032-7
    Download Restriction: no
    File URL: https://libkey.io/10.2478/v10031-012-0032-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Kon, Stanley J, 1984. "Models of Stock Returns-A Comparison," Journal of Finance, American Finance Association, vol. 39(1), pages 147-165, March.
    2. William F. Sharpe, 1971. "Mean-Absolute-Deviation Characteristic Lines for Securities and Portfolios," Management Science, INFORMS, vol. 18(2), pages 1-13, October.
    3. Praetz, Peter D, 1972. "The Distribution of Share Price Changes," The Journal of Business, University of Chicago Press, vol. 45(1), pages 49-55, January.
    4. Grażyna Trzpiot & Justyna Majewska, 2010. "Estimation of Value at Risk: extreme value and robust approaches," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 20(1), pages 131-143.
    5. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    6. Cornell, Bradford & Dietrich, J. Kimball, 1978. "Mean-Absolute-Deviation versus Least-Squares Regression Estimation of Beta Coefficients," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 13(1), pages 123-131, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Juan Carlos Gutierrez Betancur, 2017. "Robust Estimation of beta and the hedging ratio in Stock Index Futures In the Integrated Latin American Market," Revista Ecos de Economía, Universidad EAFIT, vol. 21(44), pages 37-71, June.
    2. Jensen, Mark J. & Maheu, John M., 2010. "Bayesian semiparametric stochastic volatility modeling," Journal of Econometrics, Elsevier, vol. 157(2), pages 306-316, August.
    3. Fong, Wai Mun, 1997. "Robust beta estimation: Some empirical evidence," Review of Financial Economics, Elsevier, vol. 6(2), pages 167-186.
    4. Kaehler, Jürgen & Marnet, Volker, 1993. "Markov-switching models for exchange-rate dynamics and the pricing of foreign-currency options," ZEW Discussion Papers 93-03, ZEW - Leibniz Centre for European Economic Research.
    5. Joe Hirschberg & Jenny Lye, 2021. "Estimating risk premiums for regulated firms when accounting for reference-day variation and high-order moments of return volatility," Environment Systems and Decisions, Springer, vol. 41(3), pages 455-467, September.
    6. Shige Makino & Christine M. Chan, 2017. "Skew and heavy-tail effects on firm performance," Strategic Management Journal, Wiley Blackwell, vol. 38(8), pages 1721-1740, August.
    7. Phoebe Koundouri & Nikolaos Kourogenis & Nikitas Pittis, 2016. "Statistical Modeling Of Stock Returns: Explanatory Or Descriptive? A Historical Survey With Some Methodological Reflections," Journal of Economic Surveys, Wiley Blackwell, vol. 30(1), pages 149-164, February.
    8. Errunza, Vihang & Hogan, Kedreth Jr. & Mazumdar, Sumon C., 1996. "Behavior of international stock return distributions: A simple test of functional form," International Review of Economics & Finance, Elsevier, vol. 5(1), pages 51-61.
    9. Liu, Yi & Liu, Huifang & Zhang, Lei, 2019. "Modeling and forecasting return jumps using realized variation measures," Economic Modelling, Elsevier, vol. 76(C), pages 63-80.
    10. F. Pizzutilo, 2012. "The behaviour of the distributions of stock returns: an analysis of the European market using the Pearson system of continuous probability distributions," Applied Financial Economics, Taylor & Francis Journals, vol. 22(20), pages 1743-1752, October.
    11. Eom, Cheoljun & Kaizoji, Taisei & Scalas, Enrico, 2019. "Fat tails in financial return distributions revisited: Evidence from the Korean stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 526(C).
    12. Yan, Hanhuan & Han, Liyan, 2019. "Empirical distributions of stock returns: Mixed normal or kernel density?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 514(C), pages 473-486.
    13. López Martín, María del Mar & García, Catalina García & García Pérez, José, 2012. "Treatment of kurtosis in financial markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(5), pages 2032-2045.
    14. Ha, Daesung & Chang, S. J., 1998. "The distribution of transaction intervals in common stock trading," International Review of Economics & Finance, Elsevier, vol. 7(1), pages 103-115.
    15. Chang, Carolyn W. & S.K. Chang, Jack & Lim, Kian-Guan, 1998. "Information-time option pricing: theory and empirical evidence," Journal of Financial Economics, Elsevier, vol. 48(2), pages 211-242, May.
    16. Farias, A. R. & Ornelas, J. R. H & Fajardo, J., 2004. "Goodness-of-Fit Test focuses on Conditional Value at Risk:An Empirical Analysis of Exchange Rates," Finance Lab Working Papers flwp_70, Finance Lab, Insper Instituto de Ensino e Pesquisa.
    17. Christian Gabriel & Christian Lau, 2014. "On the distribution of government bond returns: evidence from the EMU," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 28(2), pages 181-203, May.
    18. Hurlimann, Werner, 1995. "Predictive stop-loss premiums and Student's t-distribution," Insurance: Mathematics and Economics, Elsevier, vol. 16(2), pages 151-159, May.
    19. J. Francisco Rubio & Neal Maroney & M. Kabir Hassan, 2018. "Can Efficiency of Returns Be Considered as a Pricing Factor?," Computational Economics, Springer;Society for Computational Economics, vol. 52(1), pages 25-54, June.
    20. Massing, Till & Ramos, Arturo, 2021. "Student’s t mixture models for stock indices. A comparative study," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 580(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:foeste:v:12:y:2012:i:2:p:58-71:n:8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.